The prices of goods and services in America change constantly. While some brands raise their prices, others offer discounts to try to keep up with the economy. For many years now prices have been rising, which causes inflation. In times of inflation, the value of the dollar decreases meaning the dollar doesn’t stretch as far as it used to. While inflation can have a negative impact on consumers and even professionals across many industries, multifamily property owners can actually benefit from it.
The KataLYST Team has been studying and keeping up with commercial real estate trends in Des Moines and surrounding communities. We also specialize in multifamily properties and are committed to helping Iowans get the most out of their investments. Read on to hear our top tips for multifamily property investors in times of inflation.
What is the impact of inflation for investors?
For many investors and property owners, inflation will negatively affect their large investments because, as we mentioned, the value of the dollar gets you less than it used to. This means that commercial property owners with long leases or contracts could potentially lose out on profits if their rates don’t account for inflated costs of maintenance, construction, etc. These types of leases typically exist for commercial properties like offices or retail buildings.
But, inflation presents different opportunities for multifamily property owners. In fact, it gives them a very unique opportunity to capitalize on inflating costs. Since leases at apartments and multifamily properties typically run around 6 months to a year in duration, multifamily property owners can continually renew contracts and even raise rents each year to keep up with continually rising costs. As inflation forces rent increases for tenants, your main revenue stream as a multifamily property owner also increases.
Inflation in the Multifamily Industry
With a better understanding of inflation and how it impacts commercial property investors, we can predict what commercial real estate trends will follow. We know multifamily property owners will have a much faster turnover and can therefore keep up with inflation rates. We can then predict that they will hold on to their property investments during a time where inflation is rising since they’re likely to make a better profit.
Unfortunately for other investors, this can make buying new properties difficult. If current owners are reluctant to let go of their investments, then there won’t be many multifamily properties up for sale. Any available property will increase in demand, and likely price as well, creating a more competitive landscape for multifamily property investors.
Contact Our Commercial Real Estate Experts in Des Moines
The KataLYST Team has years of experience in commercial real estate, and our experts can help you understand more about the industry. Reach out today to learn more and find out commercial real estate trends.